Cost of equity is a term used in the financial world that is used to indicate the minimum rate of return on a given investment that a company must offer its shareholders to compensate them for bearing the risk of the investment, and for waiting for their returns. The rate of return consists of capital gains and dividends and is calculated using future projected returns. Because of its dynamic
. make-up the cost of equity will vary from company to company. There is a formula used to calculate the cost of equity. It consists of dividing the next year's equity appreciation per share and dividends by the current market value of the stock, and then adding the growth rate of dividends.
